Question

Assume you are a fraud examiner engaged to detect fraud for an automobile GMC/General Motors dealer in Sioux Falls. Assume that you are planning your work for the first day of field work. 1. Please outline your "plan of attack" for ascertaining if any fraud has occurred at this dealership. 2. After identifying your plan to detect fraud, what kinds of red flags will you be looking for to assess whether or not fraud might have occurred.

Answer 1

Plan of attack:

1. First of all , day one , in the field , having Physical stock of the Dealer , vehicles lying in the Godown , Showroom , elsewhere , any rented premises , owned by the dealer.
2. Take a list of Employees / Workers / including Contract workers and their history with the Dealer.
3. Taking into custody , all the Inward / Outward records , available at the entrance of and exit of the Dealer , showroom , godown any other rented premises.
4. Taking into custody all the Accounting records , with Accounts and Warehouse.
5. Instructions to the Dealer for no movement , whether Inward / Outward , without , his permission.
6. Freezing all books and records available , at the stage , wherever it is and taking into control.
7. Restricting any communication with any external agencies , suppliers or parties by email , phone , etc.
8. An Instruction to the Dealer and the team that no one will move out , until the Investigation is over. All necessities to be managed by the Dealer.
9. No leave to be granted , until the Investigation is over.
10. Movement of any stranger or supplier or customer to be checked closely
11. Any emergency may be dealt with , depending upon the merit of the case.

Red Flags for assessing existence of a Fraud:

1. Vehicle Purchase Process – The most important area of Red flag could be the Vehicle procurement process. A Dealer can adopt misleading and false information for the sake of his dealership by offering wrong discounts on the vehicles and then turning down on certain manipulated grounds . It can be starting from advertising and go up to vehicle pricing and financial terms as well. Examples can be “bait and switch” policies , where false information about the vehicle and pricing is given to the customer and while at the time of delivery of the vehicle , the scheme is changed , showing some change in guidelines by the Manufacturing Company. Hence, the customer might end up in choosing a costlier model or a model with high cost and inflated prices. In Bait and Switch policy , the customer is promised for a particular vehicle model and pricing and suddenly , at the date of delivery , he is informed that that particular model is out of stock and now the customer , who is all set to buy the vehicle has to go a choice which is costlier and pricing is also not fair.
2. Suspicious or inconsistent identification documents – When a sale by dealer is made, the genuineness of the customer is checked , through his Identification and his proof of residence etc documents. When there is no consistency between various documents, it is an indication that there might be something wrong. It happens that the Dealer sometimes to show the increase in sale, show artificial sale based on fake documents and generally , this exercise is done , at the year end and in next year beginning , sales return is shown with some customer complaints. This way the Dealer enjoys all the benefits and offers for high sale but never asked about he next year sales return for which he has all ready made reasons.
3. Hiding the facts , while dealing with second hand vehicle – Sometimes, the dealers offer the buyback offer of old vehicles , and offer good discount , in exchange of a new vehicle. But when a customer of used vehicles goes to buy it , he is fraudulently sold a vehicle , details of which is not matching with the facts , before commitment to the customer. For Example, whether the used vehicle is accidental or not , it is never informed to the customer and he comes to know , only after delivery and with the help of a third dealer or service agency. However, the Dealer has enough , genuine looking reasons for the status of the vehicle , which are quite acceptable by the prospective customer.
4. Mileage Calculation- This is quite interesting area of fraud by the dealers. A Dealer commits a particular mileage for a particular vehicle and when the customer actually checks it , after use, it is found to be fraud figure . However, the Customer is helpless as the Dealer has got a technical reply to handle these type of pre determined fraud cases. The definition of Mileage is changed and with 100 conditions , the mileage is defined.

Especially, while dealing with the used vehicles, the dealer , tampers the Milometer by reversing the kilometer and the vehicle which has run 100000 km in its life time is shown as gone for only 10000 km and the customer , estimates the life of the vehicle and the Dealer is smart enough to keep the vehicle look good .

5. Read between the Lines – You , as a prospective customer, while reading the terms and conditions for buying a vehicle, has to go through every line , so carefully that any hidden meaning , between the lines is also understood and you are not fooled at the last moment.